• Borce Trenovski Faculty of Economics, Ss. Cyril and Methodius University in Skopje, Macedonia
  • Marjan Nikolov PhD, CEA President, Senior expert
Keywords: performance based budgeting, cost–benefit analysis, budget systems, public finance, technical efficiency, Macedonia


This is the first study which estimates costs and benefits of overall policy reform for implementation of performance based budgeting. Costs estimation is based on a phased implementation, where we consult the Regulatory Impact Assessment methodology. In order to estimate benefits, we use a microeconomic approachto assess technical efficiency (Data Envelopment Analysis-DEA and Stochastic Frontier Analysis-SFA) of the budget users. The estimated benefits are higher than the estimated costs, or for every Macedonian denar invested in this reform an additional 2,600-8,000 Macedonian denars of gross value added in the MacedonianGDP are expected.


- Aigner, D. J., and Chu, S. F. 1968. “On estimating industry production functionâ€. American Economic Review,58(4), 826–839.

- Aigner, D. J., Lovell, A. K., and Schmidt, P. 1977. “Formulation and estimation of stochastic frontier production function modelâ€. Journal of Econometrics, 6(1), 21–37.

- Aristonovik and Seljak. 2009. “Performance Budgeting: Selected International Experiences And Some Lessons For Sloveniaâ€, MPRA Paper No. 15499, Online at: MPRA Paper No. 15499, posted 4. June 2009 08:29 UTC

- Bouckaert, G., and Peters, G. 2002. â€Performance Measurement and Management: The Achilles’ Heel in Administrative Modernization†Public Performance and Management Review, 25(4), 359–362.

- Broadnax, W. D. 1977. â€Zero-Base Budgeting: New Directions for the Bureaucracy?†The Bureaucrat, 6(1), 56–66.

- Broom, C. A. 1995. “Performance-Based Government Models: Building a Track Record. Public Budgeting and Financeâ€, 15(4), 3-17.

- Andonov, V. and Garvanlieva, V. 2009. “Establishing public sector investment Discount rate in Macedonia†Center for Economic Analyses (CEA). DOI:

- Chan, J.L. 2002. “Government Budget and Accounting Reforms in the United States. In Models of Public Budgeting and Accounting Reformâ€. OECD Journal on Budgeting, 2(1),187-216.

- Charnes, A., Cooper, W. W., & Rhodes, E. 1978. “Measuring efficiency of decision making units†European Journal of Operational Research, 2(4),

- Code of Good Practices in the participation of civil society sector in the policy making process, Official Gazette of RM no. 99/2011, (in Macedonian)

- Coelli, T. J. 1996a. “A Guide to DEAP Version 2.1: A Data Envelopment Analysis (Computer) Programâ€. University of New England, Department of Econometrics, CEPA Working Papers No. 96/8. DOI:

- Coelli, T. J. 1996b. “A Guide to Frontier Version 4.1: A Computer Program for Stochastic Frontier Production and Cost Function Estimation.†University of New England, Department of Econometrics, CEPA Working Papers No. 96/7. DOI:

- Coelli, T. J., Rao, P. D. S., and Battese, G. E. 1998.â€An introduction to efficiency and productivity analysis.†Boston:Kluwer Academic Publishers.

- Cooper, W., Seiford, L., and Tone, K. 2000. “Data envelopment analysis: A comprehensive text with models, applications references and DEA solver software. Boston: Kluwer Academic Publishers.

- Crain, W. M., and O’Roark, J. B. 2004. “The Impact of Performance-Based Budgeting on State Fiscal Performance.†Economics of Governance, 5 (2), 167-186.

- Diamond, J. 2006. â€Budget System Reform in Emerging Economies: The Challenges and the Reform Agenda.†The International Monetary Fund Occasional Paper No. 245, Washington D.C.

- Džinic, J. 2011. â€Public Administration Reform in Serbia.†Croatian and Comparative Public Administration, 4(1), 1075–1105.

- Guidelines for the manner of acting in the work of the ministries in the involvement in the process of conducting of Regulatory Impact Assessment, Official Gazette of RM no. 106/2013, (in Macedonian)

- Ho, A. T. 2011. “PBB in American Local Governments: It’s More than a Management Tool.†Public Administration Review, 5/6, 391-401.

- Hughes, R. 2008. â€Performance Budgeting in UK – 10 Lessons from a Decade of Experienceâ€. The International Monetary Fund, Washington D.C.41

- International Monetary Fund. 2014. “Update On The Fiscal Transparency Initiativeâ€, NEW FISCAL TRANSPARENCY CODE, IMF policy paper, DOI:

- International Monetary Fund. 2005. “Does performance budgeting work? An analytical review of the empirical literatureâ€,

IMF Working Paper WP/05/210

- International Monetary Fund. 2007. ‟IMF Code of Good Practices for Fiscal Transparency.â€

- Jones, L. R., & McCaffery, J. L. 2010. â€Performance Budgeting in the U.S. Federal Government: History, Status and Future Implications.†Public Finance and Management, 10(3), 482–523.

- Joumard, I. et al. 2008. “Health Status Determinants: Lifestyle, Environment, Health Care Resources and Efficiencyâ€,

OECD Economics Department Working Papers, No. 627, OECD Publishing. DOI:

- Joyce, P.G., and Sieg, S. 2000. “Using Performance Information for Budgeting: Clarifying the Framework and Investigating Recent State Experience.†Prepared for 2000 Symposium of the Center for Accountability and Performance of the American Society for Public Administration. Held at George Washington University, Washington, DC.

- Joyce, Philip G. 2003. “Linking Performance and Budgeting: Opportunities in the Federal Budget Process.â€IBM

Center for the Business of Government, Arlington, Virginia.

- KÄ…sek, L., and Webber, D. [eds.] 2009. â€Performance-Based Budgeting and Medium-Term Expenditure Frameworks in Emerging Europe: Current Issues in Fiscal Reform in Central Europe & the Baltic Statesâ€, World

Bank, Washington D.C.

- Kelly, J. M., and Rivenbank, W.C. 2003. “Performance Budgeting for State and Local Government.†M. E. Sharpe,

New York.

- Klase, K. A. and Dougherty, M. J. 2008. “The Impact of Performance Budgeting on State Budget Outcomes.†Journal

of Public Budgeting, Accounting & Financial Management, 20 (3), 277-298.

- Kluvers, R. 2001. “An Analysis of Introducing Program Budgeting in Local Government.†Public Budgeting and

Finance, 21(2), 29–45.

- Kraan, D.2008. “Programme Budgeting in OECD Countriesâ€, DOI:

- Law on Budgets, unofficial consolidated text (Official gazette of Republic of Macedonia no. 64/05, 04/08, 103/08,156/09, 95/10, 180/11 and 171/12)

- Law on state audit – passed by the Assembly of R. Macedonia with a Decree for Promulgation of the Law on State Audit no. 07-2001/1 as of 6th of May 2010, published in the Official Gazette of R. Macedonia no.66 of 13.05.2010, (in Macedonian)

- Lorenz, C. 2012. â€The Impact of Performance Budgeting on Public Spending in Germany’s Laender.†Wiesbaden: Springer Fachmedien, GmbH.

- Luis Schwarz and William Dorotinsky “Performance Budgeting and Management: Comparative Analysis of 16 Developing and Developed Countries†Public Expenditure Working Group Implementation – PRMPS, World Bank, May 2005

- Malcolm Holmes.1998. “Public Expenditure Management Handbook.†PRMPS. The International Bank for Reconstruction and Development. The World Bank.

- Maksimovska-Veljanovski, A. and Stojkov, A. 2014. “Performance-Based Budgeting In South-Eastern Europe: A

Legal And Economic Perspective.†Central European Journal of Public Policy Vol. 8. No.1, pp 50–77

- Meeusen, W., and Van den Broeck, J. 1977. “Efficiency estimation from Cobb-Douglas production functions with

composed error.†International Economic Review, 18(2), 435–444.

- Methodology for regulatory impact assessment (RIA), Official Gazette of R. Macedonia no 107/2013 (in Macedonian)

- Navin .2003. “Guide to Performance-based Budgeting.†CGG Collected Working Papers: 2003 — Volume 2

- Nikolov M. 2006. “Measuring the performance of kindergartens in Macedonia with Data Envelopment Analysisâ€, CEA 42

Cost-benefit analysis of performance based budgeting implementation

Journal of economics Vol.1/2. DOI:

- Nikolov M. 2009). “Budget process in Macedonia: Recent development and challengesâ€DOI:

- OECD. 1997. “In search of results: performance management practices.†Paris, PUMA/OECD.

- OECD. 2008. “Performance Budgeting in OECD countries.†OECD Publishing: Paris.

- OECD. 2010. “Health care systems: Getting more value for moneyâ€, OECD Economics Department Policy Notes,

br. 2.

- Pattison, Scott. 2011. Commentary on “State Performance-Based Budgeting in Boom and Bust Years: An Analytical

Framework and Survey of the Statesâ€, Public Administration Review, 5/6, 389-390.

- Robinson, M., and Last, D. 2009. “A Basic Model of Performance-Based Budgeting.†IMF Technical Notes and Manuals 09/01. IMF, Washington, DC.

- Robinson, M.2007. “Performance Budgeting Models and Mechanisms†in M. Robinson (ed.) Performance Budgeting: Linking Funding and Results.

- Robinson, M and H. Van Eden.2007. “Program Classificationâ€, in M. Robinson (ed.) Performance Budgeting: Linking Funding and Results.

- Diamond, J.2003.“ From Program to Performance Budgeting: The Challenge for Emerging Market Economies.†IMF

Working Paper, DOI: .

- Robinson, M. and D. Last . 2009. “A Basic Model of Performance-Based Budgeting.†IMF Technical Manual 1. DOI:

- Robinson, M., Brumby, J. 2010. â€Does Performance Budgeting Work? An Analytical Review of the Empirical Literature.†IMF WP/05/210, The International Monetary Fund, Washington D.C.

- Rulebook on the manner of conducting state audit (Official Gazette of R. Macedoniano. 66/10 and 145/10), (in Macedonian)

- Rules of procedure of the Assembly of R. Macedonia (Official Gazette of R. Macedonia no.91/2008).(in Macedonian)

- Schick, A. 1992. “The Road to PPB: The stages of budget reform.†In A. C. Hyde (Ed.), Government budgeting:

Theory, process, politics (pp. 40-60). Belmont, CA: Wadsworth, Inc.

- Schick, A. 1971. “Budget Innovation in the States.†The Brookings Institution, Washington, DC.

- Schick, A. 2002. â€Does Budgeting Have a Future?†OECD Journal on Budgeting, 2(2), 7–48.

- Schick, A. 2003. â€The Performing State: Reflection on an Idea Whose Time Has Come but Implementation Has Not.†OECD Journal on Budgeting, 3(2), 71–103.

- Schick, A. 2007. â€Performance Budgeting and Accrual Budgeting: Decision Rules or Analytical Tools?†OECD Journal on Budgeting, 7(2), 109–138.

- Stiefel, L., Rubenstein, R., and Schwartz, A. E. 1999. “Using Adjusted Performance Measures for Evaluating Resource Use.†Public Budgeting and Finance, 19(3), 67-87.

- Tandberg, Eivind. 2009. “Performance Budgeting Equals Soviet-style Central Planning?†Public Financial Management Blog.

- Tandberg, E., and Pavesic-Skerlep, M. 2009. â€Advanced Public Financial Management Reforms in South East Europe.†IMF WP/09/102, The International Monetary Fund, Washington D.C.

- Trenovski. B. 2014 “Report of the monitoring of transparency and accountability of the budget users†policy paper CEA/IDSC and European Union, (in English/Macedonian/Albanian)

- Trenovski, B. and Tashevska, B. 2014. “Performance Budgeting - for a Better Budget Process and Increasing Transparency and Accountabilityâ€, policy paper CEA/IDSC and European Union, (in Macedonian and Albanian)

- Tyer, C.B., and Willand, J. 1997. “Public Budgeting in America: A Twentieth Century Retrospective.†Public

Budgeting, Accounting and Financial Management, 9(2), 189-219.43

- Van Nispen, Frans K.M., and Johan .A. Posseth. 2007. “Performance Budgeting: Taking Stock.†EGPA Study Group on Public Sector Financial Management, Madrid, September 19-22, 2007

- Van Nispen, Frans, K.M., and Posseth Johan J.A. 2006. “Performance Budgeting in the Netherlands: Beyond Arithmetic.†OECD Journal on Budgeting , 6 (4).

- Willoughby, K.G., and Melkers, J.E. 2000. “Implementing PBB: Conflicting Views of Success.†Public Budgeting and Finance, 20(1), 85-120.

- Стратешки план на МиниÑтерÑтвото за финанÑии 2014-2016, МиниÑтерÑтво за финанÑии, Септември 2013/[Strategic Plan of the Ministry of Finance 2014-2016], Ministry of Finance, September 2013, (in Macedonian)

- “ФиÑкална Ñтратегија на Република Македонија 2014-2016â€, МиниÑтерÑтво за финанÑии на Ð . Македонија, Септември, 2013/[Fiscal Strategy of Republic of Macedonia 2014-2016], Ministry of Finance of R. Macedonia, September, 2013, (in Macedonian) 44 Cost-benefit analysis of performance based budgeting implementation